Sure, our economy is bad, but there are subtle signs that it’s getting a little better. While we may not be able to reach pre-recession norms, we are getting closer daily. According to the American Bankruptcy Institute, personal bankruptcy filings decreased in the first nine months of this year, compared to data from last year.

While this is good news, it can also be interpreted in a different manner. Last year, the Institute recorded the highest number of personal bankruptcy filings since 2005. Bankruptcies are usually the last way out as the consequences of a bankruptcy on your credit report can have resonating effects for up to ten years.

Bankruptcy is an option for consumers who have no other option, and are afraid of losing their personal property, such as homes, cars, large appliances, etc. Also, once one files for Chapter 7 bankruptcy, they are not allowed to apply again for another eight years. So the recent decrease in personal bankruptcy is not only indicative of struggling consumers. In the past eight years, 10 million consumers have filed for personal bankruptcy. So that means 10 million people are unable to file for bankruptcy at this period in time.

According to the National Bankruptcy Research Center, one out of 50 people in the United States have filed for either Chapter 7 or Chapter 13 bankruptcy in their lifetime. This becomes an important issue when consumers apply for credit cards. Consumers that recently file for bankruptcy can find it increasingly difficult to find a good credit card that suits their needs. Banks and credit card issuers generally clump consumers who recently filed bankruptcy along with consumer who have bad or no credit. This means that there are a select amount of credit cards, mortgage loans and auto loans available for you. These loans will more than likely be offered at a higher interest rate or with an annual fee.

Even if the data shows that bankruptcy is decreasing, it’s still clear that consumers are filing for bankruptcy at high rates. This is due to our current economic state, and while signs may point to progress, we still haven’t reached the light at the end of the tunnel. But some good news comes in the form of the strengthening of the creditor/debtor relationship. Now, it seems that creditors are more understanding of consumers’ financial situations and are more likely to set up payment plans that accommodate the consumer.

In fact, it is commonplace now to see consumers of all income brackets on set monthly credit card payment plans and lower interest rates that they negotiated.  Also because of the increase of homes going into foreclosure for delinquent payments has surged over the past decade, it could be anywhere from 18 to 24 months before the banks actually remove you from your home. This extra time could be enough time for the consumer to pay off any excess debt and to save themselves from being kicked out of their homes. The banks have become desperate as well, they are now more inclined to take any form of payment, before sending you to the debt collector.

In 2005, the Bankruptcy Abuse Prevention and Consumer Protection Act passed and made it harder for consumers looking to file Chapter 7 bankruptcy. The Act also made it harder for consumers who filed to see the full list of their released debts. Previously, bankruptcy meant exemption from all debts, but the Act changed that. Now, consumers may be forced to pay back some of their other debts. This is a notable change for the face of bankruptcy, which used to be the end-all, be-all solution for a cash and credit strapped consumer.

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